Cohousing-L Mailing List: Re: 50% rate of return

[Lydia & Ray Ducharme (ducharm1]

In one way you're right Lynn.  We want cohousing so badly that we would put
up the time and money required even if there was no return.  Some people
however, are jumping on the band wagon because of the rate of return.
Members who didn't think they could afford to put anything more than the
minimum down are suddenly willing to increase their contribution because
there's a good return for the risk that they're taking.  Most of us are also
borrowing against our existing homes.

In another cohousing project that we'd heard about the 50% return was quite
successful.  20% of the units were "affordable" and 20% of the units had the
50% return on investment so their unit prices were reduced.  This project
also came in under market rates.

There are a lot of people who are "wait-and-see-ing" who haven't put in any
time or money and are considering eventually buying in.  It won't break my
heart to charge them more.

We're still hopeful that we can build this project for less than market
value and that the high risk return will not be a significant percentage of
the total project costs.  (The 50% is a flat return, as well, not per annum,
and some of the money has already been in for over a year).

If anyone wants to send us their money to help finance our project during
this "risky" stage when you might lose it all, we will certainly consider it
;-)

Lydia Ducharme
WholeLife Housing
Calgary, Canada

----- Original Message -----
From: Lynn Nadeau <welcome [at] olympus.net>
To: Multiple recipients of list <cohousing-l [at] freedom2.mtn.org>
Sent: Friday, April 21, 2000 8:57 PM
Subject: Re: 50% rate of return


> If I hear you right, our first 10 households, which put in $10,000 each
> prior to our actually having lots to have title to, would have generated
> a debt to the group of $50,000. A debt that could be "paid" in various
> ways. If it went to reducing their buy-in price, that would mean that the
> other, last, ten families would each have their buy-in price raised by
> $5000. Or we could have taken $50,000 out of what was available for
> building a common house-- a nearly 20% budget cut from a budget which is
> already snug. Or count on selling two more lots, with a resulting
> reduction in common land space (and two more families to have room for in
> the common house). This seems counter-productive.
>
>  Sure, one could invest one's money instead of risking it. But people who
> are trying to build cohousing are typically willing to put in amazing
> amounts of time and money, because they want it to happen. If speculating
> in cohousing projects could realistically be counted on to bring a 50%
> return, we'd have megabucks pouring in, all over the country. I'd send
> you a loan, myself. Truth is, it costs-- both time and money. This same
> line of thought could lead to the conclusion that, just as people could
> be getting interest and dividends on their money in the stock market
> instead, so, too, could they be getting paid $5-$10-$50-$150 per hour for
> their time, instead of donating that. It really isn't rational to donate
> massive time and money, but hundreds of people have done it and are doing
> it.
>
> I say you set a minimum contribution to be "associate members" or
> whatever you call it, to be committed, with no guarantee of money back
> till someone shows up to replace you. If people are going to be coming up
> with enough money to buy a house, they can come up with an initial buy-in
> cost.
>
> If you run short of cash flow, you ask for voluntary no-interest
> offerings, which will add to the person's credit, at face value, at full
> buy in time. If there is no such money available, then you need to either
> adjust the expenses, or pay to borrow money, whether internally or
> externally. But it shouldn't ever be necessary to borrow at 50% interest!
>
> And if you do promise a 50% return, or any other financial perk (10%
> would still be better than a  CD or Money Market account) , you had
> better have a very clear legal contract, so that you are not responsible
> to pay that amount if you simply don't have it. Or I suppose you could
> get sued for breach of contract.
>
> Lynn at RoseWind
> Port Townsend WA -- where we only wish we had an "extra" $50K to disburse
> for anything!
>
>